Tarot Company has a predetermined overhead rate of $6 per direct labor hour. Last year the company incurred $156,600 of actual manufacturing overhead cost and the account was $12,600 underapplied. How many direct labor hours were worked during the year?
A)24,000 direct labor hours
B)25,000 direct labor hours
C)26,000 direct labor hours
D)28,200 direct labor hours

Question

Quizplus · Accepted Answer

The predetermined overhead rate is $6 per direct labor hour. The actual manufacturing overhead cost incurred was $156,600. The account was $12,600 underapplied. This means that the company applied $12,600 less overhead to production than it actually incurred. To calculate the number of direct labor hours worked during the year, we can use the following formula:Direct labor hours = Actual manufacturing overhead cost / Predetermined overhead rateDirect labor hours = $156,600 / $6Direct labor hours = 26,100 hoursTherefore, the correct answer is A) 24,000 direct labor hours.

Tarot Company Has a Predetermined Overhead Rate of $6 Per